San Francisco Coffee House
An American-Style Franchise In
Croatia
Group
2
Valerie- MA1N0220
David- MA1N0219
Bảo Bảo- MA1N0230
Amos- MA0N0241
San Francisco Coffee House
San Francisco Coffee House
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Introduction
SFCH- was started in winter 2003 ,
Two Croatian entrepreneurs; Denis Tensek and
Jasmina Pacek
The couple utilized their specific professional
experiences and understanding of the habits of
Croatian customers to create a unique visual identity
business opportunity
Tensek: manager in US companies, MBA ( creating
Service Quality and satisfying customer expectations
Pancek: MA in Fine arts and Design, Art Director in US
Corporations
SFCH Uniqueness
They started with one coffee shop
 The shop had a combination of service,
quality, products and cozy American
atmosphere
 They felt it had a potential to grow into a
Franchise
But had the following questions to answer;
1.
How would they grow? Growth model?
2.
Should they develop their own outlets or
open more company owned outlets?
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Possible Options
Taking a master Franchise license for Croatia
from US Starbucks
-Lengthy, complicated and extremely expensive
process vs expected returns
- also Starbucks had a low brand recognition in
Croatia,
-Imported Brands were not flexible- they did not
allow adjustment needed to succeed in the
local market ( pricing is too high) for market with
lower purchasing power.
1.
Challenges
 Opening
self owned stores
 Costly, slow, hard to control
 Lack of means and lack staff
 More risky,
 No time to travel to all locations around
the country
Investment Challenges in
Croatia
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Croatia has a small economy (low
economic development)
Changing legal system,
Little experience in franchising
They only had one young store,
Franchising was quite unfamiliar to the
Croatian emerging market,
Overall conditions were not ideal for
franchising ( insufficient regulation)
Further Questions Raised
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Should they Franchise or not?
How could they protect their Intellectual
property and Business Know –how?
How could they fight Imitators?
What would happen is Starbucks and other
major coffee chains entered the market?
How could they become the biggest and
most successful coffee House nationally or
regionally?
Investment climate in Croatia
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Political environment
Economic environment
Institutions for Franchising
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Educating about franchising
Franchising promotion
Creating websites with information about
franchising on internet
Connecting Franchisors with potential franchisees
Helping domestic companies to become
franchisors
Establishing Franchise fairs and Round tables
Barriers to Franchising
Development
Laws
Franchise
professionals
Problems with banks
unfamiliar with
Franchising
Small market
Opening of SFCH- 2003
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The entrepreneurs pursued uniqueness in their
business venture
Differentiation was their concept
Name SFCH has the Impression “Made in USA”
to attract a “new market”
Location: was crucial and had to be strategic
Town center, with heavy foot traffic
Target market was business people: students
and business professionals of all ages
Uniqueness of SFCH
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First American coffee house in Croatia- enjoy
first mover advantages :
Customers could enjoy the Authentic
Ambience of the American City,
Best decorated service industry interior with
an Urban, bright and sophisticated
Environment
Research visits to Us, studying technology of
coffee making, buying supplies and
ingredients
Product offering
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Unique assortment, different types of coffee
and ‘coffee to go’
Coffee in 17 diff latte (in milk) and mocha
varieties
American-style muffins, many varieties,
Environment: relaxing urban atmosphere
Local and international newspapers and
magazines, free wireless internet
Ambience plus smooth jazz and billboard
music
Employee Training and
Management
 Hired
young employees, no prior
experience in coffee making,
 Qualities: trustworthy, loyal and honest,
 Trained employees for working in coffee
shop and bar,
 workstations with detailed job
descriptions, checklist and shifts for weekly
or monthly routine duties vs ambiguous
job descriptions
Incentives for employees and
Stakeholders
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Salaries were higher by 20% compared to
other local coffee shops,
There were scheduled performance reviews,
if satisfactory employees were awarded with
5% salary increment
Motivated employees, improved service
quality and increased customer satisfaction
Paying suppliers on time- care for
stakeholders
SFCH FINANCIAL
PERFORMANCE
INCOME DATA
2006(IN EUR) 2007(IN EUR)
Net Revenues
13,333
16,666
Total Expenses
86,666
93,333
Direct Costs
50,666
54,000
Depreciation
2,666
7,333
Gross Profit
80,000
105,333
Operating expenses36,000
39,333
Earnings Before I&T 44,000
66,000
Taxes
9,680
14,500
Earnings after I&T
34,320
51,480
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Foreign Franchising
competitors
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o
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o
FRANCHISOR
McDonalds
restaurants
Subway
restaurants
Fornet
locations
Dama Service
locations
Berlitz
Firurella
locations
Berghoff
locations
INDUSTRY
fast food
# OF OUTLETS
16
fast food
6
bakeries
over 15
refilling Toner cartridges
3
foreign language school 1 location
weight-loss for women
2
kitchen equipment
3
Local Franchising Competitors
FRANCHISOR INDUSTRY
Electromaterijal household appliance distrib
X-nation
fashion clothes
Rubelj Grill
grill
Skandal
Fashion clothes
Body Creator
weight-loss for women
Bio & Bio
health food
Bike Express
courier services
SFCH
COFFEE BAR
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LOCATION
# OF OUTLETS
>50 Stores
40 s / corner
17 rest.
15 stores
4 centers
3 shops
1 center
1
Way Forward?
Franchising: possible model for business
growth.
 Advantages:
 Lower financial investment,
 Lower risk
 Faster growth
 Local market knowledge by franchisee
 The franchisee’s motivation to succeed
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shortcomings
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Not enough information about franchising;
low entrepreneurial and institutional
awareness of franchising
No well established support organizations for
the development of franchise networks in
Croatia (2 centers only)
No significant support from financial
institutions; banks reluctant to take the risk,
Company –SFCH- was young and unproven in
other locations
Options for SFCH growth
o Enjoy their local success,
o Open additional stores
themselves, or
o Try their own Franchise
concept
Question1
 Could
the couple develop franchising in a
market where the local conditions were
less than conducive?
 Answer:
too Risky
Question 2
Could they gain national prominence?
 Yes they could, since they were first cafe in
American style combining quality, service,
style and good price
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Moreover, the taste of coffee as well as other
cafe‘s features were adapted to the local
hobbits (which for example Starbucks cannot
be so flexible)
They were successful in the poorest
region..why not to be successful in other
Croatian regions
Franchising is a challenge
Question 3
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The couple had never run a franchising business and
did not have the necessary experience and
knowledge. How could they overcome the
weaknesses they possessed and the environmental
threats?
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Bring Foreign investors – can take advantage of
incentive, tax benefits, customs privileges
Cooperation with centers for franchising business (future
franchising – long-term view) according the EU prognosis
we can find high potential in Franchising system
Cooperation with foreign banks directly - not only with
subsidiary banks
Other form – licensing, join venture
Question 4
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How could they seize the opportunities in the market
place using their unique experiences, capabilities and
strengths?
The uniqueness of the concept which gave birth to San
Francisco Coffee House places itself at an advantage
over its competitors.
The idea behind this coffee shop is rooted in America,
from the menu to the ambiance of the shop itself
present a one of a kind experience which is totally
different compared to Croatian coffee shops.
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Since the concept is Americanized, a way that they can seize
more opportunities in the market is through research and
development as the food and beverage industry in America is
changing constantly.
Based on the research and development that they will be
doing, they will be able to keep up with the trends present in
American coffee shops so that they can offer new items in
their shop while continuing to maintain their competitive
advantage and possibly attract more opportunities at the same
time.
Thank You For
Your
Attention!!!
Enjoy your Day!!